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Bank Size, Collateral, and Net Purchase Behavior in the Federal Funds Market: Empirical Evidence


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  • Allen, Linda
  • Peristiani, Stavros
  • Saunders, Anthony


Differences between large and small banks' net purchase behavior in the (uncollaterized) federal funds and (collateralized) repurchase agreements markets are documented. The larger a bank's asset size, the larger, ceteris paribus, its Federal Funds purchases. The threshold-asset size is in the region of $1 billion to $2.5 billion. For any size class, banks located in major banking centers are more likely to be net Federal Funds purchasers than are banks located outside money centers. In the collateralized repurchases agreements market, there appears to be no size of locational discrimination--indeed, the smallest banks are the largest net purchasers (as a fraction of assets) of funds on the repurchases agreements market. Copyright 1989 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 62 (1989)
Issue (Month): 4 (October)
Pages: 501-15

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Handle: RePEc:ucp:jnlbus:v:62:y:1989:i:4:p:501-15

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Cited by:
  1. Falko FECHT & Kjell G. NYBORG & Jörg ROCHOLL, 2010. "The Price of Liquidity: Bank Characteristics and Market Conditions," Swiss Finance Institute Research Paper Series, Swiss Finance Institute 10-20, Swiss Finance Institute.
  2. Adam Ashcraft & James McAndrews & David Skeie, 2009. "Precautionary reserves and the interbank market," Staff Reports, Federal Reserve Bank of New York 370, Federal Reserve Bank of New York.
  3. Pritsker, Matthew, 2013. "Knightian uncertainty and interbank lending," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 22(1), pages 85-105.
  4. Brown, Craig R. & Griffiths, Mark D. & Hansen, Wayne E. & Winters, Drew B., 1999. "A profitable trading rule for net borrowers on settlement Wednesday," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 39(1), pages 129-146.
  5. Morten L. Bech & Enghin Atalay, 2008. "The topology of the federal funds market," Staff Reports, Federal Reserve Bank of New York 354, Federal Reserve Bank of New York.
  6. Fecht, Falko & Nyborg, Kjell G. & Rocholl, Jörg, 2011. "The price of liquidity: the effects of market conditions and bank characteristics," Working Paper Series, European Central Bank 1376, European Central Bank.
  7. Giuseppe Bruno & Ernesto Maurizio Ordine & Antonio Scalia, 2005. "BanksÂ’ participation in the Eurosystem auctions and money market integration," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 562, Bank of Italy, Economic Research and International Relations Area.


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